Case: 45CI1:18-cv-00093 Document #: 6 Filed: 05/16/2018 Page 1 of 10

IN THE CIRCUIT COURT OF MADISON COUNTY, MISSISSIPPI

HIGHWAY 22, LLC PLAINTIFF

VS. CIVIL ACTION NO. CI-2018-0093

WILLIAM B. MCHENRY, LAMAR

ADAMS, MADISON TIMBER
PROPERTIES, LLC AND JOHN DOES
1-5 DEFENDANTS

WILLIAM B. MCHENRY’S ANSWER AND CROSS-CLAIM AGAINST

LAMAR ADAMS AND MADISON TIMBER PROPERTIES, LLC

William B. McHenry (“McHenry”) responds to Highway 22, LLC’s (“H-22”) Complaint

and asserts Cross-Claims against Lamar Adams (“Adams”) and Madison Timber Properties,

LLC (“MTP”) as follows:

FIRST DEFENSE

McHenry asserts all defenses that are available to him under Miss. R. Civ. P. 12(b).

SECOND DEFENSE

Plaintiff’s Complaint fails to state a claim against McHenry upon which relief can be

granted.

THIRD DEFENSE

McHenry asserts all available defenses that are available or may become available

(through additional investigation) under Miss. R. Civ. P. 8(c).

FOURTH DEFENSE

McHenry asserts all privileges and protections afforded by Miss. Code §85-5-7.

FIFTH DEFENSE

McHenry asserts all rights of set-off.

SIXTH DEFENSE

H-22 failed to mitigate its alleged damages.

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SEVENTH DEFENSE

McHenry asserts all privileges and protections afforded by Miss. Code §75-71-509.

EIGHTH DEFENSE

Mississippi laws and procedures governing punitive damages are violative of the Sixth

Amendment, the Eighth Amendment, the due process clause and equal protection clause of the

Fourteenth Amendment, and other provisions, of the United States Constitution, and Article III,

§ 14, and other provisions of the Constitution of the State of Mississippi.

ANSWER TO COMPLAINT

McHenry answers the allegations against him in the Complaint paragraph by paragraph

as follows:

Parties

1. Upon information and belief, the allegations in paragraph 1 of the Complaint are

admitted.

2. The allegations in paragraph 2 of the Complaint are admitted.

3. The allegations in paragraph 3 of the Complaint are denied except to the extent it

repeats the allegations set out in paragraph 2.

4. The allegations in paragraph 4 of the Complaint are denied except to admit MTP

is, upon information and belief, wholly-owned by Adams and that according to the Mississippi

Secretary of State’s website information Adams is MTP’s registered agent for service of

process. McHenry specifically and emphatically denies being “a managing and/or general agent

of MTP” at any time.

5. The allegations in paragraph 5 of the Complaint are denied. McHenry

specifically and emphatically denies “knowingly joined in, conspired with and/or aided and

abetted MTP, Adams and John Does 1-5 in breach of fiduciary and other duties and/or

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knowingly participated and/or engaged in the actionable activities” to the legal wrong and/or

substantial harm and damage of H-22.

Jurisdiction and Venue

6. The allegations in paragraph 6 of the Complaint are admitted.

7. The allegations in paragraph 7 of the Complaint are admitted as to Venue, and

denied to the extent it is alleged that McHenry engaged in acts and omissions and/or substantial

events that caused injury to H-22.

Factual Allegations

8. The allegations in paragraph 8 of the Complaint are denied.

9. The allegations in paragraph 9 of the Complaint are denied except to admit Sherri

Hughes (“Hughes”) contacted McHenry concerning her desire to participate in making loans to

MTP for financing the purchase of timber for sale to lumber mills. McHenry admits that in the

past Hughes and her son had successfully financed timber purchases through loans to MTP.

10. The allegations in paragraph 10 of the Complaint are denied except to admit

pursuant to Hughes expressed desire and request, he helped her participate in timber financing

through loans to MTP. Upon information and belief, McHenry admits Hughes successfully

financed timber purchased for a timber mill through loans made to MTP, for which Hughes

received a 13% return.

11. The allegations in paragraph 11 of the Complaint are denied.

12. The allegations in paragraph 12 of the Complaint are denied except to admit

Exhibit A to the Complaint appears to be a correct copy of a Promissory Note signed by Lamar

Adams as Manager (and sole owner) of MTB, the content of which speaks for itself.

13. The allegations in paragraph 13 of the Complaint are denied except to admit upon

information and belief that in and around January 2018, H-22 through its trustee and lawyer,

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Eddie Abdeen, re-up its participation with another $150,000 loan for timber financing at a 13%

rate, and that the total amount $169,500, being $150,000 principle plus $19,500 in interest is

reflected in the face value of Exhibit A to the Complaint. McHenry further admits he was

involved with the timber financing loan by delivering MTP’s loan documentation as well as any

requested by H-22 and its trustee, Eddie Abdeen and receiving H-22 loan funds, which were

delivered to MTP on H-22’s behalf.

14. McHenry is without sufficient information and belief to admit or deny the

allegations contained in paragraph 14 of the Complaint, and accordingly denies the allegations.

McHenry does admit in May 2018 he learned that Adams and MTP had engaged in a fraudulent

ponzi scheme which prior to then, numerous people, including the H-22 trustee, Eddie Abdeen,

and other lawyers and accountants had reviewed and approved and in which many people had

successfully participated. McHenry was shocked by the revelation of this fraudulent ponzi

scheme and found it unbelievable so many, including the lawyers, trust entities and other

sophisticated investors had been fooled by Adams’ deception for so long.

15. The allegations in paragraph 15 of the Complaint are denied as to McHenry.

McHenry admits that in May 2018 he learned that for a number of years Adams and MTP had

engaged in a fraudulent ponzi scheme. McHenry was shocked by this fraudulent revelation and

found it unbelievable so many, including the lawyers, trust entities and other sophisticated

investors had been fooled by Adams’ deception for so long.

Causes of Action

Count I – Declaratory Judgment

16. McHenry incorporates by reference his answers to paragraphs 1-15 set out above.

17. McHenry denies H-22 has any rights or obligations as to him and denies the

Exhibit A – Promissory Note is a “security” under the Mississippi Securities Laws.

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COUNT II

Breach of Fiduciary Duties

18. McHenry incorporates by reference his answers to paragraphs 1-17 set out above.

19. The allegations in paragraph 19 of the Complaint are denied.

20. The allegations in paragraph 20 of the Complaint are denied.

21. The allegations in paragraph 21 of the Complaint are denied.

COUNT III

Joining in Breach of Fiduciary Duties

22. McHenry incorporates by reference his answers to paragraphs 1-21 set out above.

23. The allegations in paragraph 23 of the Complaint are denied.

24. The allegations in paragraph 24 of the Complaint are denied.

COUNT IV

Civil Conspiracy and/or Aiding and Abetting

25. McHenry incorporates by reference his answers to paragraphs 1-24 set out above.

26. The allegations in paragraph 26 of the Complaint are denied.

27. The allegations in paragraph 27 of the Complaint are denied.

COUNT V

Constructive Trust

28. McHenry incorporates by reference his answers to paragraphs 1-27 set out above.

29. The allegations in paragraph 29 of the Complaint are denied.

COUNT VI

Breach of Contract – Promissory Note

30. McHenry incorporates by reference his answers to paragraphs 1-29 set out above.

31. The allegations in paragraph 31 of the Complaint are denied as to McHenry.

32. The allegations in paragraph 32 of the Complaint are denied as to McHenry.

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33. The allegations in paragraph 33 of the Complaint are denied as to McHenry.

COUNT VII

Fraud – Omission and Misrepresentations

34. McHenry incorporates by reference his answers to paragraphs 1-33 set out above.

35. The allegations in paragraph 35 of the Complaint are denied.

36. The allegations in paragraph 36 of the Complaint are denied.

COUNT VIII

Accounting

37. McHenry incorporates by reference his answers to paragraphs 1-36 set out above.

38. The allegations in paragraph 38 of the Complaint are denied.

COUNT IX

Mississippi Securities Fraud – Miss. Code Ann. §75-71-509

39. McHenry incorporates by reference his answers to paragraphs 1-38 set out above.

40. The allegations in paragraph 40 of the Complaint are denied.

41. The allegations in paragraph 41 of the Complaint are denied.

42. The allegations in paragraph 42 of the Complaint are denied.

McHenry denies the allegations in the unnumbered paragraph that begins with

“WHEREFORE, PREMISES CONSIDERED.” McHenry further denies that Plaintiff, H-22 is

entitled to any relief against him whatsoever.

Further, McHenry denies each and every allegation in Plaintiff’s Complaint that is not

specifically admitted in this Answer.

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CROSS-CLAIM AGAINST LAMAR ADAMS

AND MADISON TIMBER PROPERTIES, LLC

Pursuant to Rule 13(g) Miss. R. Civ. P., McHenry asserts a cross-claim against Adams

and against MTP based on the subject matter set out in H-22’s Complaint, while reserving all

other rights, claims and causes of action against Adams and MTP, as follows:

1. On May 1, 2018, a federal criminal information was filed against Adams charging

him with engaging in a scheme and artifice to defraud numerous people beginning “as early as

2011 and continuing through April 2018.”

2. Prior to the last days in April 2018, McHenry had an amicable business and

personal relationship with Adams. On several occasions, McHenry and Adams, along with

other investors, purchased real estate for investment. McHenry was aware of Adams’

successful business dealings with a number of sophisticated, successful businessmen and

financial and investment advisors. From these business and personal dealings, Adams gained

McHenry’s trust. McHenry’s experience with and observations of Adams dealings with others

gave McHenry the belief that Adams was a sophisticated, highly competent businessman who

was reliable, honest and had integrity. Unbeknownst to McHenry, Adams exploited McHenry’s

trust and confidence in his business acumen.

3. Adams’ scheme to defraud included representing to McHenry, H-22, Eddie

Abdeen and others “that Madison Timber Properties was in the business of buying timber rights

from landowners and then selling the timber rights to lumber mills at a higher price.” As part of

the scheme, Adams created “false documents to lull” McHenry, H-22, Eddie Abdeen and

numerous others to believe participation in the timber financing was safe and secure. In that

respect, Adams “created false timber deeds” and “forged the signatures of landowners” in order

to make the financing arrangement “appear legitimate.” To aid his deception, Adams had

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“documents notarized to make the investments appear legitimate” to McHenry, H-22, Eddie

Abdeen and others.

4. As part of his elaborate and highly “sophisticated” scheme, Adams used the

business entity MTP. In 2011, Adams formed MTP as a Limited Liability Corporation. Adams

was the sole owner and manager of MTP. Adams fraudulently represented to McHenry, H-22,

and Eddie Abdeen, as well as other people, that MTP “was in the business of buying timber

rights from landowners and then selling the timber rights to lumber mills at a higher price.” The

object of the scheme was to cause McHenry and a number of others, including lawyers and

advisors, to introduce people to Adams and MTP who might be interested in providing timber

financing through “loans that purportedly were for the purpose of purchasing timber rights

contracts to be sold to lumber mills.” Typically, the purported loans “guaranteed an interest rate

of 12 to 13 percent,” which was repaid by MTP “over the course of the next twelve to thirteen

months.”

5. McHenry, H-22 and Eddie Abdeen, along with numerous other people, were

deceived, tricked and lulled into trusting Adams and believing the lumber mill timber financing

loan arrangements of MTP were legitimate and secure. In reasonable reliance upon Adams and

MTP representations and the participation of lawyers, sophisticated investors and at least one

investment trust, McHenry introduced several people to Adams and MTP’s financing of lumber

mill timber purchases through loans secured by timber deeds.

6. Adams betrayed and duped McHenry into believing the timber financing loans

were secure while providing an attractive rate of return. In short, McHenry had no idea or

inkling Adams was a crook.

7. As a direct result of Adams’ fraudulent ponzi scheme, McHenry was named a

defendant in this lawsuit and has suffered injury to his good reputation and name in the

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community and with the people who he introduced to Adams and MTP through adverse

publicity and his being unfairly associated with Adams’ fraudulent scheme. Adams and MTP’s

fraudulent ponzi scheme has exposed McHenry to this legal action and other potential claims as

well as costs of defending himself and his good reputation.

8. Adams and MTP’s acts of deception and fraud were committed knowingly,

intentionally solely and exclusively for Adams’ personal benefit and enrichment without regard,

care or concern to personal ruin and reputational wreckage, inflicted upon McHenry. Adams’

callous and fraudulent conduct constitute the most egregious and pernicious acts for which

punitive damages are to be awarded.

Accordingly, William B. McHenry demands a judgment against Lamar Adams and

Madison Timber Properties, LLC, jointly and severally, for compensatory damages in an amount

to be proven at trial, plus punitive damages in an amount to be assessed at trial but no less than

Ten (10) Million Dollars ($10,000,000), plus all court costs, litigation expenses and attorney fees

incurred in defending this case and prosecuting this cross-claim. William B. McHenry further

requests he be awarded any all other relief to which he is entitled upon the grounds stated, claims

pled and/or any other theories of recovery and relief available under the facts and law after

completion of all necessary discovery and investigation into the subject matter of Plaintiff

Highway 22, LLC’s Complaint.

THIS, the 16th day of May, 2018.

Respectfully submitted,

PHELPS DUNBAR LLP

BY: /s/ Frank W. Trapp

Frank W. Trapp, MB 8261
4270 I-55 North
Jackson, Mississippi 39211-6391

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Post Office Box 16114

Jackson, Mississippi 39236-6114
Telephone: 601-352-2300
Telecopier: 601-360-9777
Email: frank.trapp@phelps.com

ATTORNEY FOR DEFENDANT WILLIAM B.

MCHENRY

CERTIFICATE OF SERVICE

I certify that this document was filed with the Clerk of Court using the CM/ECF system,

which sent notification of such filing to all counsel of record.

A copy of this document was also mailed via U.S. Mail, postage pre-paid, to the

following:

Eddie J. Abdeen
Abdeen Law, PLLC
P.O. Box 2134
Madison, MS 39130

Arthur Lamar Adams

134 St. Andrews Drive
Jackson, MS 39211

John M. Colette
John M. Colette & Associates
501 South State Street
Jackson, MS 39201

This the 16th day of May, 2018.

/s/ Frank W. Trapp__________________

FRANK W. TRAPP

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